The impact of loyalty programs service quality and store reputation on customer satisfaction and loyalty

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Dang Bich Phuong THE IMPACT OF LOYALTY PROGRAM’S SERVICE QUALITY AND STORE REPUTATION ON CUSTOMER SATISFACTION AND LOYALTY MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2016 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Dang Bich Phuong THE IMPACT OF LOYALTY PROGRAM’S SERVICE QUALITY AND STORE REPUTATION ON CUSTOMER SATISFACTION AND LOYALTY I D: 22130056 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr.PHAM NGOC THUY Ho Chi Minh City – Year 2016 ACKNOWLEDGEMENTS The completion of this thesis is a remarkable achieve in my life It has been several months and required a great effort for the research I would like to express my gratitude to all ISB staffs that supported necessary materials and helped summit my papers I also wish to express my deeply thank you for the support, patience and encouragement from my family, my colleagues and my classmates helped me to completing this thesis Especially, I would like to give my special thanks to Doctor Pham Ngoc Thuy for supporting and guiding me with this research i STATEMENT OF AUTHENTICATION (Candidate Certificate) I certify that the work in the thesis entitled “The impact of loyalty program’s service quality and store reputation on customer satisfaction and customer loyalty” is the result of my own research and has not been submitted for a higher degree to any university or institution other than International School of Business (ISB) I also certify that the thesis has been written by me Any help and assistance that I have received in my thesis have been appropriately acknowledged Ho Chi Minh City, 20 December 2015 Dang Bich Phuong ii TABLE OF CONTENTS ACKNOWLEDGEMENT i STATEMENT OF AUTHENTICATION ii TABLE OF CONTENTS iii LIST OF FIGURES v LIST OF TABLES vi ABSTRACT vii Chapter 1: Introduction 1.1 Research background 1.2 Research problems 1.3 Research objectives 1.4 Research methodology and scopes 1.5 Significance of the study 1.6 The structure of the study Chapter 2: Literature review and hypotheses 2.1 Customer Loyalty Program 2.2 Customer Loyalty Programs of big retailers in Ho Chi Minh City 2.3 Conceptualization of Loyalty program service quality 10 2.4 Store reputation 15 2.5 Customer Satisfaction 17 2.6 Customer Loyalty 18 2.7 The conceptual model 19 Chapter 3: Research methodology 23 3.1 Research design 23 iii 3.2 Measures of the constructs 24 3.3 Research process 26 3.4 Data analysis method 28 Chapter 4: Data analysis and findings 31 4.1 Sample characteristics 31 4.2 The Cronbach’s alpha test 32 4.3 Exploratory factor analysis (EFA) 35 4.4 Multiple regression analysis 37 4.5 Revised conceptual model 40 4.6 Explanation for the findings results of the hypotheses 42 Chapter 5: Conclusions, inplications and limitations 46 5.1 Conclusions 46 5.2 Managerial implication 47 5.3 Limitations and future research 59 References 51 Apendix 58 Appendix A: Guideline for quanlitative in-depth interview 58 Appendix B: Quentionnaire in English 62 Appendix C: Questionnaire in Vietnamese 66 Appendix D: Histogram, Normal Regression & Scatter plot of Dependent 71 iv LIST OF TABLES Table 2.1: The comparison between the Customer Loyalty Program of three main brand names of supermarket in Ho Chi Minh City: Co.opmart, Big C and Lotte Mart Table 2.2: Hypotheses of the research 21 Table 3.1: Measurement Scales from previous research basements 24 Table 3.2: Measurement Scales for customer satisfaction .25 Table 3.3: Measurement of the variables of customer satisfaction and customer loyalty 25 Table 3.4: Measurement of the variables of store reputation 25 Table 4.1 : Descriptive Statistics for the Sample (N = 209) 31 Table 4.2: The results of Cronbach’ alpha test 33 Table 4.3: KMO and Bartlett's Test for all variables .35 Table 4.4 : Total Variance Explained for all variables 36 Table 4.5: Rotated Component Matrix for all variables 37 Table 4.6: Correlations or all variables 38 Table 4.7: Model Summary 38 Table 4.8: ANOVA alpha 39 Table 4.9: Coefficients alpha 39 Table 4.10: Finalized hypotheses of the research 41 Table 4.11: Summary of hypotheses testing results .42 Table 4.12: Statistics of frequency of factors that affect customer choosing to shop at a supermarket 44 Table 4.13: The number of supermarket brand that customers participate in the customer loyalty program 45 v LIST OF FIGURES Figure 2.1: The proposed conceptual model for the thesis 21 Figure 3.1: The process of thesis research .23 Figure 4.1: The revised and finalized research model 40 vi ABSTRACT This study empirically examines the impact of loyalty program’ service quality and store reputation on customer satisfaction and customer loyalty, which is carried on at some biggest chains of supermarket at Ho Chi Minh city such as Big C, Co.opmart, Lotte Mart, Metro, Vinmart, The research also explores some of the factors that influence the most towards customer satisfaction in retail industry In the situation that the facilities and the prices of all supermarket brand names are similar, the loyalty program’s service quality and how good of this program plays an important role in attract and retain customers Structural equation modeling is used to test these impacts, utilizing a sample of 250 supermarket customers in Ho Chi Minh City All the customers who are interviewed must have the member card of one or more supermarket that they usually shop at The results indicate that the three elements of loyalty program’s service quality which are Regulation (included Rewards and Policy), Serving (included Staff and Communication) and Personalization play significant role in increasing the customer satisfaction as well as customer loyalty In addition, the findings of this research also provide evidence of the similarity between customer satisfaction and customer loyalty in the mindset of supermarket retailer customer Particularly, the effect of store reputation is negligible and the customers not pay attention to this element in judging their satisfaction as well as their loyalty for a supermarket brand name The customers are persuaded by the Regulation, Serving and Personalization of the loyalty program of one specific supermarket compared to other supermarkets The research findings also engage with some limitations in the strength of measurement scale, the sampling method as well as the fitness between the research model and data It results in the valuable directions for further researches in future vii CHAPTER INTRODUCTION This chapter introduces the background of the Vietnamese supermarket industry as well as the status of customer satisfaction and customer loyalty The research questions and objective are proposed to explore the influence of loyalty program’s service quality and store reputation towards customer satisfaction and customer loyalty Based on this, the proposed delimitation of research and thesis structure is presented 1.1 Research background After nearly nine years of joining the World Trade Organization (WTO), and more than six years commitment for the establishment of retail businesses with 100% foreign capital (from the date 01/01/2009), Vietnam has made a drastic change in the distribution and retail sector by the opening of hundreds of stores and supermarkets Vietnam's retail market has always been rated as promising, attractive for business, investors in and out of Vietnam territory Many international retailers have operated in Vietnam besides the local companies, and there are still many other international groups interested in entering the market And under report of A.T.Keraney (2014), Vietnam retail market is in the top 30 world best new retail markets in the period from 2007 to 2011 Moreover, basing on the 2014 report of Deloitte Southeast Asia Ltd, Vietnam’s retail market is also characterized as being one of the most dynamic markets in the region with high annual growth rates Hanoi and Ho Chi Minh City have been ranked among the top 10 Asian cities for retail expansion in 2014 Over the last few years, Vietnam’s retail sector has also witnessed healthy growth rates, with retail sales growing by 60% from 2009-2013, and forecasted to reach US$109 billion in 2017 The retail market in the country today is not only competition between domestic enterprises but also with large foreign retailers Huge system such as Co.opmart supermarket chain is leading the market but the big retail groups of foreign countries include Big C, Lotte, Metro Cash & Carry, also occupied a considerable market share In the near future, Vietnam is currently undergoing negotiation to participate in the Trans-Pacific Partnership Agreement (TPP), Free Trade Agreement Appendix Appendix A: Guideline for qualitative in-depth interview In-depth interview Rewards Loyalty Program Service Quality, Omar and Musa (2011) The supermarket loyalty program offers The respondents suggest replacing the word “high-quality” by “good quality and practical” high-quality gifts The supermarket loyalty program offers The word “branded” is a little bit confused, it branded reward gifts will be better if asking them by using the word “famous” The supermarket loyalty program The word “desirable” is difficult to understand, so the respondents suggest using “practical, provides desirable reward gifts matching” for this question Staff Loyalty Program Service Quality, Omar and Musa (2011) The staff solves cardholders’ queries The word “solved” is not right in some situation, so the respondents recommend to replace by “answer the queries” or supported the customers The staff cares about receiving The scale is easily to understand feedback The staff often have cardholders’ best The sentence is so emotional, so the respondent recommend changing this sentence into “The interests at heart staff receive the satisfaction of cardholders” The staff listens to cardholders’ The scale is easily to understand suggestions Policy Loyalty Program Service Quality, Omar and Musa (2011) 58 Procedures that are easy to understand It will be better if the author add in the word “clear” to the policy Enough time to redeem the points The scale is easily to understand 10 Earned points quickly The scale is easily to understand Tangibility Loyalty Program Service Quality, Omar and Musa (2011) 11 Provides a comfortable seating area The sentence will be more clear to understand if it is wording by “Loyalty customer service counters of supermarkets is spacious, comfortable” 12 Service counter is easy to find The scale is easily to understand 13 Service counter has space to move The scale is easily to understand around Communication Loyalty Program Service Quality, Omar and Musa (2011) 14 Web site is useful The scale is easily to understand 15 Offers a reliable web site The scale is easily to understand, but if it is official website, it is obviously reliable 16 Web site is informative The scale is difficult to understand because the word “informative” is so broad and have the same mean with “useful” 17 Web site is easy to access The scale is easily to understand, but nowadays almost every websites is very easy to access 18 Web site updated regularly The scale is easily to understand 19 Prompt feedback through the web site The scale is easily to understand 20 Web site is attractive The scale is easily to understand, but it is not important to have an attractive website in the retail sector 59 Personalization Loyalty Program Service Quality, Omar and Musa (2011) The word “personalized service” can change to 21 Provides personalized service “the rights and privileges under each level card” 22 Gives personal attention The respondent suggest the sentence wording is “The customer loyalty program has care policy at the levels of cards” 23 Acts in cardholders’ best interest The respondent suggest the sentence wording is “The customer loyalty program at supermarket bring satisfaction for each cardholder” Information Loyalty Program Service Quality, Omar and Musa (2011) 24 Reminds about expiry date of points The scale is easily to understand 25 Informs about participating outlets The word “participating outlets” can be wording into “full information about the suppliers participating in the promotion for cardholders” 26 Reminds about expiry date of vouchers The scale is easily to understand Store reputation Chiang (2006) 27 Retailer history is reliable The history may not important for them to choose, so they suggest the items “after sales service” to replace 28 Reliability for the quality of goods The scale is easily to understand 29 Word of mouth is excellent It will be more specific if the author change the sentence to “I often hear the words evaluated and commented favorably on supermarket” Customer satisfaction Loyalty Program Service Quality, Omar and Musa (2011) 60 30 I feel comfortable when shopping at the The scale is easily to understand supermarket 31 I am pleased that the supermarket meets The scale is easily to understand my requirements 32 I am glad that have chosen to shop The scale is easily to understand supermarket Customer Loyalty Loyalty Program Service Quality, Omar and Musa (2011) 33 I would recommend this retail store to The scale is easily to understand, but they think others that the recommendation if not as important as the real experience the quality of supermarket 34 I visit this store more frequently than The scales have the same meaning with others in other retail stores this section 35 In the near future, I am likely to The sentence should be rewrite as “I think that I am a loyalty customer of the supermarket” purchase from this retail store again 36 I would continue to purchase from this The scale is easily to understand but it is not retail store even if there was a slight reasonable because everyone cares about the rice increase in price so much 37 I consider the store to be my first The scale is easily to understand choice of retail store 61 Appendix B: Questionnaire in English SURVEY FORM Dear Ladies and Gentlemen, My name is Dang Bich Phuong, a student of MBA program at ISB Institution – University of economics Ho Chi Minh City I am studying about The impact of loyalty program quality and store reputation on customer satisfaction and loyalty We wish Ladies/ Gentlemen for leaving the time to answer this survey Kindly be All responses of Ladies/ Gentlemen are valuable to this study Your personal information will be kept completely confidential During the survey, if you have any questions, please contact me via email: phuongdang1989@gmail.com or phone number 0985958939 Sincere thanks to the support of Ladies and Gentlemen Part A Survey of participating supermarket’s loyalty programs Have you join the supermarket’s loyalty program yet? e answer the questionnaire) the survey) Which supermarket that you have been joined in the loyalty program? Note: There may be multiple choice answers to this question Other:………………… Which supermarket you often shop at? Other:………………… Call X is supermarket where you regularly shop at and register the Customer loyalty program card: How long have you been participated in Customer loyalty program at supermarket X? – years 62 – years How many times per month you often go shopping at supermarket X? – times – times – 10 times 10 times The reason that you choose shopping at the supermarket X is: Note: There may be multiple choice answers to this question Goods agree Part B Survey of supermarket’s customer loyalty programs quality Please indicate the level of your agreement of with the following statement about the "X" by marking (√) in the Agree …good quality gifts …gift of the famous brands …practical gifts, matching …the clear policy, easy to understand 5 …enough time to accumulate points to redeem …easily accumulate points when shopping …remind customers regularly to accumulate points off period … full information about the suppliers participating in the promotion for cardholders Box No Box No 1: 5: Totally disagree Totally agree And with different level type in the box number 2, and Totally Middle with: Disagree boxes, Totally disagree appropriate Loyalty program at supermarket X has: 63 …remind customers about voucher expiry date 10 …the rights and privileges under each level card 11 …care policy at the levels of card 12 Customer Loyalty Program at supermarket X produce satisfaction for each cardholder 5 14 …attention to feedbacks and comments from the cardholder 15 …get the satisfaction of cardholders 16 …always listen to suggestions of cardholders 17 Loyalty customer service counters of supermarkets X is spacious, comfortable 18 Loyalty customer service counters of supermarkets X is easy to find 19 Information about customer loyalty program posted on website is useful, updated 20 Supermarket X promptly answer questions about loyalty program through the website 21 The quality of goods in supermarkets X is reliable 22 I often hear the words evaluated and commented favorably on supermarket X 23 The after sales service is quite good (refund or exchange if the customer returns the product ) 24 I feel comfortable when shopping at the supermarket X 25 I am pleased that the supermarket X meets my requirements 26 I am glad that have chosen to shop supermarket X Employee of customer supermarket X: loyalty program 13 …answer the queries of cardholders 64 at 27 Supermarket X would be my first choice when shopping 28 I realized I was loyalty customers of supermarket X 29 I just buy at the supermarket X rather than at any other supermarket Part C Your personal information Sexual: □ Male □ Female Age: □ 18 – 23 □ 24 – 30 □ 31 – 40 □ 41 Monthly income (VND): □ Under million VND □ From to under million VND □ From to under 15 million VND □ From 15 to under 25 million VND □ Above 25 million VND Career: □ Homemaker □ Staff office □ Worker □ Entrepreneur □ Freelancer □Other: ……………… Marital status: □ Single □ Married Thanks for your support 65 □ Married and with children Appendix C: Questionnaire in Vietnamese PHIẾU KHẢO SÁT Chào Ơng/Bà, tơi tên Đặng Bích Phương, học viên cao học Viện Đào Tạo Quốc Tế, Trường Đại Học Kinh Tế TP HCM Tôi nghiên cứu Sự ảnh hưởng Chất lượng dịch vụ chương trình khách hàng thân thiết danh tiếng siêu thị đến hài lòng lòng trung thành khách hàng Rất mong Ông/Bà dành vài phút để trả lời Phiếu khảo sát Sự hỗ trợ Ông/Bà quan trọng cảm kích Thơng tin cá nhân Ơng/Bà giữ bí mật hồn tồn Trong trình thực phiếu khảo sát này, Ơng/Bà có thắc mắc nào, xin vui lịng liên lạc với thông qua địa email: phuongdang1989@gmail.com số điện thoại 0985958939 Phần A Khảo sát việc tham gia chương trình khách hàng thân thiết siêu thị Ơng/Bà tham gia chương trình Khách hàng thân thiết (KHTT) siêu thị chưa? ả lời tiếp bảng câu hỏi) ảm ơn kết thúc khảo sát) Xin vui lịng cho biết Ơng/Bà tham gia chương trình khách hàng thân thiết siêu thị Lưu ý: Có thể có nhiều lựa chọn trả lời cho câu hỏi ghi rõ):………………… Ông/Bà thường mua sắm siêu thị nhất? ghi rõ):………………… Gọi X siêu thị mà Ông/Bà thường xuyên mua sắm có thẻ KHTT: 66 Xin vui lịng cho biết Ơng/Bà tham gia chương trình khách hàng thân thiết siêu thị X bao lâu? ới năm – năm – năm năm Xin vui lịng cho biết Ơng/Bà mua sắm siêu thị X trung bình lần tháng? – lần – lần – 10 lần Trên 10 lần Lý mà Ông/Bà lựa chọn mua sắm siêu thị X là: Lưu ý: Có thể có nhiều lựa chọn trả lời cho câu hỏi ẻ ần nhà ạng ất lượng ều khuyến ệt tình (vui lịng ghi rõ):………………… Phần B Khảo sát chất lượng chương trình khách hàng thân thiết siêu thị Hồn tồn khơng đồng ý Khơng đồng ý Trung dung Đồng ý Hoàn toàn đồng ý Xin cho biết mức độ đồng ý Ông/Bà với phát biểu …quà tặng có chất lượng tốt …quà tặng thương hiệu tiếng …quà tặng thiết thực, phù hợp sau “X” cách đánh dấu (√) vào ô tương ứng, với: Ơ số 1: Hồn tồn khơng đồng ý Ơ số 5: Hồn tồn đồng ý Cịn với mức độ khác đánh vào số 2, Chương trình Khách hàng thân thiết siêu thị X có: 67 …thể lệ rõ ràng, dễ hiểu 5 …đủ thời gian tích điểm đổi quà …cách thức tích điểm dễ dàng mua sắm …nhắc nhở khách hàng thường xuyên thời hạn đổi 5 10 …quyền lợi ưu đãi theo cấp độ thẻ 11 …chính sách chăm sóc theo cấp độ thẻ 5 13 …giải đáp thắc mắc chủ thẻ 14 …quan tâm đến góp ý, nhận xét chủ thẻ 15 …nhận hài lòng chủ thẻ 16 …luôn lắng nghe đề xuất chủ thẻ 5 điểm tích lũy …thơng tin đầy đủ nhà cung cấp tham gia khuyến cho chủ thẻ …nhắc nhở khách hàng thời hạn sử dụng phiếu quà tặng 12 Chương trình KHTT siêu thị X tạo hài lòng cho chủ thẻ Nhân viên chương trình Khách hàng thân thiết siêu thị X: 17 Quầy dịch vụ khách hàng thân thiết siêu thị X rộng rãi, thoái mái 18 Quầy dịch vụ khách hàng thân thiết siêu thị X dễ tìm, dễ thấy 68 19 Thơng tin chương trình KHTT đăng website siêu thị X hữu ích, cập nhật 5 5 5 5 5 20 Siêu thị X kịp thời trả lời thắc mắc chương trình KHTT thơng qua website 21 Chất lượng hàng hóa siêu thị X đáng tin cậy 22 Tơi thường nghe lời đánh giá bình luận tốt đẹp siêu thị X 23 Các dịch vụ sau bán hàng tốt (hoàn tiền đổi trả khách hàng khơng hài lịng sản phẩm…) 24 Tơi thấy thoải mái mua sắm siêu thị X 25 Tơi thấy hài lịng siêu thị X đáp ứng yêu cầu 26 Tôi thấy vui lựa chọn siêu thị X để mua sắm 27 Siêu thị X lựa chọn mua sắm 28 Tôi cho khách hàng thân thiết siêu thị X 29 Tôi mua hàng siêu thị X siêu thị khác Phần C Thơng tin cá nhân Ơng/Bà: Giới tính: □ Nam □ Nữ Nhóm tuổi: □ 18 – 23 tuổi □ 24 – 30 tuổi □ 41 tuổi Mức thu nhập tháng: (VND) 69 □ 31 – 40 tuổi □ Dưới triệu □ Từ đến triệu □ Từ đến 15 triệu □ Từ 15 đến 25 triệu □ Trên 25 triệu Nghề nghiệp: □ Nội trợ □ Nhân viên văn phòng □ Doanh nhân □ Nghề tự □ Cơng nhân □ Khác (vui lịng ghi rõ):…………………… Tình trạng nhân: □ Độc thân □ Đã có gia đình Cảm ơn hỗ trợ quý Anh/Chị 70 □ Đã có gia đình có Appendix D: Histogram, Normal Regression & Scatter plot of Dependent Variable: Customer Satisfaction and Loyalty 71 72 ... positive impact of communication on the customer satisfaction H1f There is a positive impact of personalization on the customer satisfaction H1g There is a positive impact of information on the customer. .. impact of information on the customer satisfaction 2.4 Store reputation The reputation of a business is essential to its survival The reputation of a store may be interpreted by its actions and. .. positive impact of customer loyalty program service quality on the customer satisfaction H1a There is a positive impact of rewards on the customer satisfaction H1b There is a positive impact of staff